Employer of Record in The United Arab Emirates

Hiring in The United Arab Emirates for the first time can be overwhelming, especially when navigating unfamiliar employment laws. Whether you hire independent contractors, set up a legal entity, or use an EOR service, understanding the local employment landscape is crucial for success. Playroll’s comprehensive guide can help you get started if you're hiring locally or relocating a team member.

Companies can hire employees in The United Arab Emirates in the following three ways:

• Setting up a local entity. Entity establishment reduces risk exposure and enables direct hiring, but can be costly and time-consuming – making it less practical for companies seeking quick and flexible solutions for hiring in The United Arab Emirates.
• Partnering with an Employer Of Record. An EOR, like Playroll, is a third-party entity that serves as the legal employer of your international workforce which hires, pays, and manages compliance with The United Arab Emirates’s labor laws and tax regulations.
• Hiring independent contractors. Hiring contractors gives companies a flexible, affordable alternative to hiring local employees, though it involves unique misclassification risks.

Businesses can only operate smoothly in The United Arab Emirates if they comply with local labor laws including drafting compliant employment contract agreements and meeting taxation and payroll obligations. Learn more about the employment laws and regulations in The United Arab Emirates below, to avoid any compliance issues.

Employment Contract Requirements

Before signing the employment contract in The UAE, all employees must sign an offer letter stating the basic employment terms. The basic terms are as follows:

• Names of the employer and employee
• Beginning date of employment
• Expiry, or renewal, date of employment
• Salary information
• Usual working hours and days
• Annual leave and pay
• Sick leave and pay
• National holidays
• Employees working title
• Notice period for termination of the employment relationship
• Place of employment
• Employers disciplinary rules, if applicable
• Free Zone rules, if applicable

Onboarding Process

We can help you get a new employee started in The United Arab Emirates quickly, with a minimum onboarding time of just 1-2 working days. The timeline starts once the employee submits all required information onto the Playroll platform and completes any necessary local authority registrations.

For non-nationals, the Right to Work assessment (if applicable) may add up to three extra days. Additional time may be needed for follow-ups on this assessment. Please note, payroll cut-off dates can impact the actual start date. Playroll's payroll cut-off date is the 10th of each month unless otherwise specified.

Working Hours in The United Arab Emirates

Employees work 8 hours a day, up to 48 hours a week, from Monday to Friday. During Ramadan, working hours are reduced by 2 hours daily. Workers must have a break after five consecutive hours, totaling at least an hour, which should not be counted within the working hours.

Overtime in The United Arab Emirates

Employees can work a maximum of two extra hours per day. If the job demands work beyond regular hours, employees receive overtime pay, computed at different rates.

Fridays and Nighttime overtime , between 9 pm and 4 am, is compensated at 150% of the regular salary rate, while other overtime periods are paid at 125%.

Probation Period in The United Arab Emirates

In The UAE, probation periods are limited to six months, and employees cannot be subjected to probation more than once. This regulation is outlined in Article 37 of the Emirati Labour Law.

Fiscal Year in The United Arab Emirates

1 January - 31 December is the 12-month accounting period that businesses in the United Arab Emirates use for financial and tax reporting purposes.

Payroll Cycle in The United Arab Emirates

The payroll cycle in The United Arab Emirates is usually monthly, with employees being paid first day of the month.

Minimum Wage in The United Arab Emirates

There is no national minimum wage in the UAE. However, the Emirati Labor Law does dictate that all wages and salaries must meet employees’ basic needs. The UAE Cabinet decree determines the minimum wage and cost of living index for specific professions and areas of the country.

Bonus Payments in The United Arab Emirates

In the United Arab Emirates, there is no obligation for employers to provide a 13th-month salary payment.

Employer Tax Contributions

Employer payroll contributions are generally estimated at an additional 12.5% on top of the employee salary in The United Arab Emirates.

Employee Payroll Tax Contributions

In The United Arab Emirates , the typical estimation for employee payroll contributions cost is around 5%.

Individual Income Tax Contributions

The UAE does not impose personal income tax. in January 2022, the Ministry of Finance introduced a federal corporate tax on business profits, applicable to domestic businesses in all emirates. Foreign businesses operating in Free Zones are exempt from any taxes.

Pension in The United Arab Emirates

In the UAE, The General Pension and Social Security Authority (GPSSA) provides pension services for old-age retirement, disability, death, and occupational illnesses. Employees are eligible for an old-age retirement pension if they achieve 50 years of age with 20 years of service.

Mandatory Leave Entitlement in The United Arab Emirates

The annual leave entitlement in The United Arab Emirates is 30 days for a full time worker. These can include public holidays on top of that or within those days, which would otherwise be unpaid.

Public Holidays In The United Arab Emirates

In the UAE, there are 15 public holidays each year. These holidays are separate from the minimum paid leave entitlement and are taken in addition to annual leave. The following holidays are recognized as national holidays in the UAE:

Paid Time Off in The United Arab Emirates

Employees in the UAE are entitled to annual leave after six months of service. Employers must pay the employee's salary before the start of their annual leave, and the leave should generally be utilized within the stipulated year unless the company has a carryover policy in place. Annual leave is accrued as follows:

• For six months to a year of employment: accrual of 2 days per month
• After completing a year of service: a minimum of 30 calendar days of paid leave

Maternity Leave In The United Arab Emirates

Female employees are entitled to a 60-day maternity leave in the UAE, comprising 45 days with full wage followed by 15 days with half wage. They can apply for this leave up to 30 days prior to the expected delivery date and may extend absence without pay for up to 45 days after utilising the maternity leave. The following details are also applicable to maternity leave in The UAE:

• Employees can take up to 45 unpaid days for medical conditions related to pregnancy or delivery, backed by a professional medical certificate.
• It's not permissible to terminate employment due to pregnancy or absence resulting from maternity leave.

Paternity Leave In The United Arab Emirates

UAE law doesn't mandate separate paternity leave beyond the five days allotted for parental leave. There's currently no additional statutory paternity leave in the UAE.

Sick Leave In The United Arab Emirates

After the probation period, employees are entitled to 90 days of paid sick leave per year, subject to the following terms:

• 100% of regular salary for the initial 15 days of sickness
• 50% of regular salary for the subsequent 30 days
• No salary for the remaining 45 days

Parental Leave In The United Arab Emirates

Private sector employees in the UAE are granted 5 days of paid parental leave, which can be taken until the child reaches 6 months of age. Proof of the child's birth is required when requesting this leave.

Bereavement Leave

Employees are granted 5 days of paid time off in case of their spouse's death and 3 days off in case of the death of their mother, father, son, daughter, brother, sister, grandson, or grandparent.

Study Leave

Employees associated with an accredited UAE educational institution will receive 10 days of paid study leave after completing 2 years of service.

Termination Process in The United Arab Emirates

In the UAE, both parties in an employment contract can terminate for legitimate reasons. This requires notifying the other party in writing, following the correct notice period, and informing the relevant authorities accordingly. Legitimate reasons may include:

• Performance or behavioural issues
• Bankruptcy
• Insolvency
• Worker's failure to renew a work permit

Notice Period in The United Arab Emirates

In accordance with UAE labor law, a mandatory notice period of at least 30 days is stipulated. However, for employees under the DIFC employment law, the length of the notice period is determined by the duration of employment as follows:

• 1-5 months of employment: 2 weeks' notice
• Up to 5 years of employment: 1 month's notice
• 5 or more years of employment: 90 days' notice

Severance in The United Arab Emirates

Severance payouts in The UAE depend on certain factors. These are described below:

• After a year of service, a worker is entitled to severance pay, calculated at 21 days' wage for each year within the first 5 years and 30 days' wage for each subsequent year, prorated for any time worked beyond a full year.
• For foreign employees, severance pay is capped at two years' wage and is calculated based on the last basic wage received.